KippaPay to shut down, Kuramo's $150 Million Investment and Safaricom's Acquisition of M-PESA Holdings

KippaPay to shut down, Kuramo's $150 Million Investment and Safaricom's Acquisition of M-PESA Holdings

Here are the highlights of tech around Africa for this week.

  • KippaPay to Shut Down
  • Kuramo's $150m Investment
  • Safaricom's Acquisition of M-PESA Holdings

KippaPay to shut down

Nigerian fintech startup Kippa is set to discontinue its offline payment product, KippaPay, effective November 15, 2023. In line with this decision, the core team responsible for KippaPay will be laid off by December 2023, although the company is committed to providing them with severance packages and support in finding new employment opportunities.

This choice to sunset KippaPay is motivated by a strategic initiative to streamline and consolidate the company's profitable product portfolio. Kippa's CEO, acknowledged the difficulty of this decision, expressing pride in the contributions of the team and the positive impact KippaPay had on their merchant base.

The devaluation of Nigeria's currency in June 2023 has had a significant impact, causing the naira's value to drop and escalating operating expenses for businesses reliant on imported components. Kippa, which sources its point-of-sale machines from abroad, faced resource strain and an extended breakeven period of 2.5%.

As they approach the final shutdown of KippaPay, the company is committed to settling outstanding accounts for its merchants. Since its launch in 2020, Kippa has been a valuable provider of bookkeeping solutions to over 500,000 small businesses in Nigeria. In April 2022, Kippa introduced KippaPay to facilitate invoicing and payments, and it secured $8.4 million in funding from investors in September 2022, aiming to expand into agency banking.

In light of these changes, Kippa will focus its efforts on its core strengths in bookkeeping and business registration services, realigning its business strategy to better serve its target market. This strategic move comes at a time when the company's focus is shifting to maintain a strong position in a dynamic fintech landscape.

Kuramo’s $150 Million Investment in Sub-Saharan African Women-Led Enterprises

Kuramo Capital Management, a prominent investment firm operating in Sub-Saharan Africa, is embarking on a visionary journey, committing $150 million over the next decade to support women-led businesses through the innovative Moremi Platform. This groundbreaking endeavor seeks to empower the next generation of African female entrepreneurs and advance gender-equitable fund management.

The Moremi Platform consists of three fundamental components: an accelerator program, a warehousing/lending facility, and a Fund of Funds. The accelerator program, serving as a mentorship and capacity-building platform, will target an annual cohort of 40 female entrepreneurs and fund managers.

Wale Adeosun, the CEO and Founder of Kuramo, has underscored the critical importance of bridging the funding and knowledge divide that often impedes women in the business world. This divide stands as a significant barrier to inclusive and sustainable economic and social development in African nations. The program is not only a beacon of support for female entrepreneurs but also a catalyst for enhancing the capabilities of women fund managers, ultimately promoting the growth of women-driven enterprises.

Key Takeaways

  1. The World Economic Forum's Insights: Sub-Saharan Africa is identified as the region with the highest rate of female participation in entrepreneurial activities, with women constituting 58% of the self-employed workforce.
  2. Addressing Gender Bias: Despite the substantial representation of women in entrepreneurial activities, gender bias still hampers their ability to access financing and expand their businesses.
  3. Challenging Statistics: Research from Briter Bridges reveals that only 3% of the total funding raised by startups in Africa since 2013 has gone to all-women co-founded teams.
  4. The Imperative for Change: Initiatives like Kuramo's are pivotal in increasing female representation and contributions in the startup ecosystem, countering the dominance of male-run ventures.
  5. Gender-Inclusive Investment: Capitalizing on the robust female entrepreneurial base, it is imperative for Africa to implement strategies that prioritize gender-inclusive investment practices, fostering a more equitable and prosperous business landscape.

Safaricom's Acquisition of M-PESA Holdings

Safaricom PLC recently completed its acquisition of M-PESA Holdings Co. Limited, signifying a momentous shift in the landscape of mobile financial services in Kenya and East Africa. Initiated on April 17, this acquisition, which involved Safaricom entering a share purchase agreement with Vodafone International Holdings BV, is a pivotal development in Safaricom's journey to strengthen its position in the mobile financial services sector.

M-PESA Holdings, acting as the corporate trustee for safeguarding customer funds under the M-PESA trust arrangement, was an essential entity in this acquisition. This trust arrangement, established in compliance with the National Payment System Regulations of 2014, mandates the responsible stewardship of customer funds. Now under Safaricom's control, this shift significantly impacts the mobile money platform landscape.

This acquisition is not just about ownership; it has profound financial implications. M-PESA Holdings held around €1.2 billion in customer funds as of April 2023. Safaricom's acquisition of this trust company could significantly enhance its cash flow, particularly if the company opts to invest these deposits in short-term securities.

Investing in short-term securities is not new, as Vodafone employed this strategy during its 15-year ownership of M-PESA Holdings. The interest income generated from these investments can further boost Safaricom's financial performance.

This acquisition also holds significant importance in light of Safaricom's recent financial challenges. The company experienced three consecutive years of revenue decline due to expansion into Ethiopia and a $150 million license acquisition for mobile money services. In this context, acquiring M-PESA Holdings is a timely financial decision.

However, the acquisition is not without complexities. M-PESA Holdings and Vodafone recently faced a $2.3 billion lawsuit alleging violation of Kenyan trust company laws. This lawsuit claims that Safaricom, through its digital loan product Fuliza, engaged in banking services without a license by using M-PESA user deposits.

Despite legal challenges, Safaricom and other defendants proceeded with the agreement to purchase M-PESA Holdings for $1, indicating their commitment to the acquisition.

Another crucial aspect of this acquisition is its alignment with evolving regulatory standards in Kenya. The National Payment System Act has been enacted to guide digital payments in the country. Safaricom, though a licensed payment service provider, has faced scrutiny for its lending operations, which lack a banking license.

The acquisition not only strengthens Safaricom's financial standing but also brings it in line with regulatory standards, potentially preventing Vodafone from controlling the trust managing M-PESA deposits.